My lectures of the last decade have focused a lot on the cattle cycle and its resulting beef price cycle. My key message has been that if you fight the cattle cycle, you'll lose every time.

Astute ranchers make the cycle work for them. And, with a little studying and planning, you can, too.

In the 1990s, some of my IRM (Integrated Resource Management) cooperators were practicing management strategies targeted toward making the cattle cycle work for them. These cooperators taught me their counter-cyclical, profit-making management strategies.

As I integrated their strategies into my talks, other ranchers would share their unique strategies for making the cattle cycle work. I've since combined all these into five overall counter-cyclical management strategies for making the cattle cycle work for ranchers.

During the 1990s, the University of Missouri and Iowa State University established the Food and Agricultural Policy Research Institute (FAPRI) to study and evaluate national agricultural policy programs. In its analysis, FAPRI focused on projecting annual updates to their long-run beef planning prices. These serve as a foundation for the annual revisions of my long-run planning prices.

Integrating FAPRI's long-run beef planning prices into my cattle cycle educational programs was a natural. With these long-run planning prices, my educational energies were focused on counter-cyclical ranch management strategies for making the cattle cycle work for ranchers. These profit-making, counter-cyclical management strategies made money for ranchers who implemented one or more of the strategies.

Three years ago, I culminated this cattle-cycle educational program by generating a CD video of my classic cattle cycle lectures emphasizing the five counter-cyclical strategies. I now market that CD video to ranchers for $25/CD.

Three years ago, I decided to no longer lecture on cattle cycles, but I continue to receive inquires about the topic and how to make it work for ranchers. As a result, I'm again lecturing on cattle cycles. Here's my most recent cattle cycle update for the rest of this decade:

Cycles are alive and well

A typical cattle cycle runs 10-12 years, with a five-year period where U.S. “all-cattle” numbers increase year after year. It's typically followed by a five-year period where the all-cattle number decreases year after year.

There are actually three phases in each cattle cycle — expansion, contraction and turnaround. We're currently in the turnaround phase and entering expansion.

What causes cattle cycles is the biology of the beef cow. Once ranchers get the price signal to expand, it takes three years to expand beef production. By that time, the price signal is to contract.

Once a replacement heifer is retained, it's three years before that heifer will produce a harvest animal. Since no one is talking about changing the biology of the beef cow, the cattle cycle is alive and well.

The last cattle cycle

The last cattle cycle was atypical in that the contraction phase lasted eight years rather than the typical five (Figure 1). As drought impacted the U.S., western ranchers culled cows and sold heifers.

In fact, some Wyoming herds didn't hold back any replacement heifers for two consecutive years. I estimate the typical Wyoming herd reduced its stocking rate by 20%, with a few herds going down by 60% of normal.

All Northern Plains and West states continued to liquidate cows in the multiple drought years. Meanwhile, states such as Kentucky increased beef cow numbers.

Figure 2 summarizes the extended liquidation of the last cycle (FAPRI 2004). The all-cattle number was projected to continue to fall through 2006.

Record 2003 calf prices triggered the turnaround in 2004, and USDA's Jan. 1, 2005, all-cattle inventory numbers was a surprise when it came in at an increase over the Jan. 1, 2004, inventory number. The projected numbers for 2006-2011 in Figure 2 are my projections for the beginning years of the current cattle cycle.

The important implication of all this is that the expansion phase of the next cattle cycle has begun. We experienced the turnaround phase in 2004-05, and the multi-year expansion of the new cattle cycle is now underway. If you doubt this, visit your local salebarn and observe the price of bred replacement heifers.

Selling bred heifers at today's high prices is one of my five suggested counter-cyclical management strategies for making the cattle cycle work for a rancher. With females as overpriced as today, just sell bred females.

I find ranchers often become frustrated during the turnaround phase. Ranchers like to use last year's prices as the current year's planning prices. I often hear statements like: “I made money backgrounding my calves last year, so I'm going to background them this year,” or “I made money running grass yearlings last year, so I am going to run grass yearlings this year.”

But, things are changing so fast that using last year's prices as this year's planning prices doesn't work very well. In the turnaround phase, ranchers must look forward for planning prices, not backward.

In the multi-year liquidation phase, or multi-year expansion phase, using last year's prices as this year's planning prices works better. As we enter the current expansion phase, rancher frustrations should decline.

Projected next cattle cycle

Figure 3 shows my projected next cattle cycle. I assume ranchers will build the all-cattle numbers at the same rate as in the first half of the 1990s. I could easily argue that the price signal of the last two years is even stronger than the price signal of the early 1990s.

This stronger price signal could easily suggest an even more rapid growth rate over the next four-plus years. I elected, however, to use the 1990s' growth and contraction rates to project this current cattle cycle's growth and contraction phases.

It suggests that expansion will peak in 2011, after which all-cattle numbers will again turn down. The all-cattle number is projected to peak this time at about 1 million fewer cattle (beef and dairy) than the 1990s' peak. Remember, dairy cow numbers are generally trending down.

Figure 4 presents FAPRI's 2005 projected beef cow numbers for the next cattle cycle. The expansion phase is projected to continue through 2012 and peak at 36.1 million beef cows. (I project beef cow numbers will peak in 2010.)

The contraction phase will be the five years after beef cow numbers peak — completing the current cattle cycle. Low calf prices will trigger the beef cow contraction phase. Remember that as beef cow numbers go up, beef prices will go down.

Next month, I'll go into the resulting beef price cycle generated by the projected current cattle cycle.

Harlan Hughes is a North Dakota State University professor emeritus. He lives in Laramie, WY. Reach him at 701/238-9607 or harlan.hughes@gte.net.